An application service provider is a company that businesses use to provide information technology needs over a network. Specifically, employees of the business access software applications and other IT services from an offsite location, which is the application service provider. This access takes place over a network, usually Web-based. Employees log in to the server in order to do their work.

Using an application server has several significant benefits for a company. First and foremost, the company doesn't have to buy the software applications that its employees use via the application service provider. This potentially offers a huge savings, since software can be expensive even when bought at volume discounts.

Secondly, a company can expect that by using an application service provider, it eliminates its technical support quotient. Since the application service provider grants access to its servers and software, it must also be responsible for making sure that a company's employees are able to use that software effectively and efficiently.

Thirdly, an application service provider will of necessity have standardized versions of software applications. This eliminates problems associated with employees using different versions of an application. It also means that upgrades of certain software applications that a company's employees use will be the responsibility of the application service provider. In order to keep its customers happy and its services up-to-date, the application service provider will of necessity have the latest and greatest versions of every piece of software it offers.

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Most application service providers are of the enterprise kind, as described above. However, in this day of Web-based everything, some application service arrangements are for individual and disparate users. For example, Web-based mail services like Yahoo! Mail and Google's Gmail are this kind of service.

Every person who has a Yahoo! or Gmail account counts on either Yahoo! or Gmail to function as an application service provider for the purposes of email. Other search engines, Lycos among them, offer such services as well. And it's not just email. Yahoo! and Microsoft offer a suite of online applications, including calendars, notes programs, and other services.

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